Hawaii Retainage Overview

Retainage serves two general purposes: (1) To provide an incentive to the contractor or subcontractor to complete the project; and (2) To give the owner some protection against problems like liens, contractual defaults, delays, and more.  In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and frequently asked questions about Hawaii’s retainage requirements. The Hawaii retainage statutes are reproduced below on this page.

Hawaii Retainage for Private Projects FAQs

Hawaii Retainage FAQs

Does Hawaii limit the amount of retainage that can be withheld from a contractor?

Hawaii does not provide a retainage statute for private projects, so this is not specified by state law.

How long can a party withhold retainage in Hawaii?

Hawaii does not provide a retainage statute for private projects, so this is not specified by state law.

Does Hawaii require retained funds be deposited in a special account? Can securities be substituted for retainage?

Hawaii does not provide a retainage statute for private projects, so this is not specified by state law.

How can I make a claim to recover retainage in Hawaii? N

Hawaii does not provide a retainage statute for private projects, so this is not specified by state law.

Is there a specific notice required to recover retainage in Hawaii?

Hawaii does not provide a retainage statute for private projects, so this is not specified by state law.

Hawaii Retainage for Public Projects FAQ

Hawaii Retainage FAQs

Does Hawaii limit the amount of retainage that can be withheld from a contractor?

Retainage may not exceed 5% of funds due.  Once the project is 50% complete, retainage must be eliminated if progress is satisfactory (if progress is unsatisfactory, retainage may be continued).  Contractor may not withhold more from the subcontractor than withheld from it.

How long can a party withhold retainage in Hawaii?

This is not specified in the Hawaii retainage statute for public projects.

Does Hawaii require retained funds be deposited in a special account? Can securities be substituted for retainage?

The retainage funds must be held by a procurement officer. Securities may be substituted for retainage.

How can I make a claim to recover retainage in Hawaii?

Party seeking release of retainage may submit a payment request, but statute is unclear.

Is there a specific notice required to recover retainage in Hawaii?

See above.

Hawaii Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Hawaii’s retainage laws, the rules and regulations related to the amount and timing of allowable retained payments, is important to know your rights and responsibilities as a party on a construction project. Hawaii’s specific laws can be found in: Haw. Rev. Stat. § 103-32.1, and are reproduced below.

Retainage Statute on Private Projects

N/A

Hawaii does not provide a retainage statute for private projects.

Retainage Statute on Public Projects

§ 103-32.1: Contract provision for Retainage; Subcontractors

(a) Any retainage provided for in this section or requested to be withheld by the contractor shall be held by the procurement officer.

(b) A dispute between a contractor and subcontractor of any tier shall not constitute a dispute to which the State or any county is a party, and there is no right of action against the State or any county. The State and a county may not be interpleaded in any judicial or administrative proceeding involving such a dispute.

(c) Any public contract may include a provision for the retainage of a portion of the amount due under the contract to the contractor to ensure the proper performance of the contract; provided that:

(1) The sum withheld by the procurement officer from the contractor shall not exceed five per cent of the total amount due the contractor and that, after fifty per cent of the contract is completed and progress is satisfactory, no additional sum shall be withheld; provided further that if progress is not satisfactory, the procurement officer may continue to withhold, as retainage, sums not exceeding five per cent of the amount due the contractor; and

(2) The retainage shall not include sums deducted as liquidated damages from moneys due or that may become due the contractor under the contract.

(d) Where a subcontractor has provided evidence to the contractor of:

(1) A valid performance and a payment bond for the project that is acceptable to the contractor and executed by a surety company authorized to do business in this State;

(2) Any other bond acceptable to the contractor; or

(3) Any other form of collateral acceptable to the contractor,

the retention amount withheld by the contractor from its subcontractor shall be not more than the same percentage of retainage as that of the contractor. This subsection shall also apply to the subcontractors who subcontract work to other subcontractors.

(e) This section shall not be construed to impair the right of a contractor or a subcontractor at any tier to negotiate, and to include in their subcontract, provisions that:

(1) Permit the contractor or subcontractor to retain, without cause, a specified percentage of no more than ten per cent of each progress payment otherwise due to a subcontractor for satisfactory performance under the subcontract, without incurring any obligation to pay a late payment interest penalty, in accordance with terms and conditions agreed to by the parties to the subcontract, giving such recognition as the parties deem appropriate to the ability of a subcontractor to furnish a performance bond and a payment bond, subject however, to the limitations of subsection (d); and

(2) Permit the contractor or subcontractor to make a determination that part or all of the subcontractor’s payment request may be withheld by the procurement officer in accordance with the subcontract agreement, without incurring any obligation to pay interest or a late payment penalty if a written notice of any withholding is issued to a subcontractor, with a copy to the procurement officer, specifying the following:

(A) The amount to be withheld;

(B) The specific causes for the withholding under the terms of the subcontract; and

(C) The remedial actions to be taken by the subcontractor to receive payment of the amounts withheld.

(f) A contractor may not request payment from the procurement officer of any amount withheld or retained in accordance with subsection (e) until such time as the contractor has determined and certified to the procurement officer that the subcontractor is entitled to the payment of such amount.

(g) The provisions of this section shall not be construed to require payment to subcontractors of retainage released to a contractor pursuant to an agreement entered into with the procurement officer meeting the requirements of section 103-32.2.

§ 103-32.2: Substitution of Retainage

Any other law to the contrary notwithstanding, any public contract may provide that the procurement officer may enter into an agreement with the contractor which will allow the contractor to withdraw from time to time the whole or any portion of the sum retained under section 103-32.1 upon depositing with the procurement officer any general obligation bond of the State or its political subdivisions with a market value not less than the sum to be withdrawn; provided that the procurement officer may require that the total market value of such bond be greater than the sum to be withdrawn.